There's been a narrative in the industry of late that you may have been reading: What's going to happen to a sport that is so dependent on subsidy and slot machines if it all goes away, as cash-strapped governments deal with budgetary pain?
The question is probably a little 'Dr. Doom' I suppose, but it isn't without merit.
I'll take a stab at it.
i) The Big Tracks Get Bigger - If you're bigger, I think you're going to be better. If smaller slots-tracks close we'll see bigger fields, better racing, and more handle. In addition, as bigger tracks gain more control, it gives them power to get even bigger.
WalMart and Amazon don't mind minimum wage hikes because they can eat them through agglomeration, supply chain squeezing and increased pricing power, while smaller competitors can't. They love certain regulation because with their power they can help shape it and create costly barriers to entry. The big tracks would have many of the same advantages and should be pretty fine, in my view, despite lost revenue.
ii) Innovation? Maybe, Maybe Not - Recently there was a shortage of swabs that were needed immediately, and no existing manufacturers could figure out how to increase production quickly (it would take a year or more). But, after creating a little innovation incubator by collaborating and sharing information, CEO's of various companies, led by a smaller one, shared over 200 prototypes and created a plan over a weekend. In one month's time, millions of swabs were ready to ship via 3-D printing.
We often hear invention is created by necessity; Mark Zuckerberg talks about mission critical innovation. To grow with no subsidy, revenues would be a necessity, and it should be mission critical. Would the bigger companies in racing do similar? If we look at history it's doubtful, but it's not without precedent in the real world.
iii) Higher Prices for Players - With the big dogs okay, the smaller ones are not, and that inhibits competition. Signal fees for the CDI's and NYRA's of the world will probably be high and takeout will probably never come down. TVG, not owning a large track, might even have a comeuppance (despite having a broadcast, which is worth something). Look to Canada and HPI's betting monopoly to see how that works for a preview. This might seem counterintuitive, but it's kind of the way the sport is run, isn't it?
There's a narrative that when the going gets tough, companies get scrappy. They scratch and claw for customers, control costs, market better, innovate better and provide better and better product and pricing. For a good deal of them that's true. But for racing, it doesn't feel, to me, that will be the formula. I could, as I often am, be wrong; it just doesn't seem to fit this sports' model.
There are several issues I did not discuss that are obvious - smaller foal crops, fewer tracks, less employment. But for the core business, I think those three are fair-minded ideas of what a drop in subsidy revenue would mean.
With casinos already seemingly packed, and slot machines sure to follow at some point, maybe it's much ado about nothing. Predicting the future over the last few months has been harder to hit than a twin jackpot pick 6 for me.
Have a nice Tuesday everyone.
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